What You Need to Know About Personal Umbrella Insurance

By August 6, 2020November 18th, 2020No Comments

While you may be protected with your home and personal auto insurance policies, are you fully protected? Consider getting a personal umbrella insurance policy to give you even more peace of mind.

What Is Personal Umbrella Insurance, and Why Should You Have a Policy?

  • Personal umbrella insuranceis personal liability insurance that can come into play when you’re liable for a claim greater than your homeowner or auto insurance amount will pay1. Another way of looking at it is coverage “above and beyond” your standard insurance2. The coverage of a personal umbrella is applied after the underlying home or auto insurance is exhausted.
  • Depending on your policy, umbrella insurance covers you, your family and members of your household against lawsuits involving personal injury to others and damage to other people’s property3.
  • Since a personal umbrella policy provides coverage beyond your home or auto insurance, you have additional coverage to help with various expenses. If you are sued, you could be forced to pay a legal judgment from your current assets andfuture earnings, as well as defense costs4.
  • Remember, this coverage is designed for damages against another person or their possessions, not you as the policyholder or your possessions5.

Who Needs It?
Umbrella insurance is most often purchased by people who have many assets, but it isn’t only for the “super wealthy”. You might want to consider umbrella insurance if you6:

  • Are a property owner.
  • Have significant savings or other assets.
  • Have items that could lead to lawsuits such as swimming pools or dogs (check with your independent insurance agent to make sure your dog’s breed is covered under your policy).

What a Personal Umbrella Policy Won’t Cover
With a personal umbrella policy, the following situations would likely NOT be covered7:

  • Damage to your own property, as personal umbrella coverage applies when you’re held responsible for damage to someone else’s property.
  • Damage that you or a covered member of your household cause on purpose, for example, if you deliberately injure a guest in your home. In this case, neither umbrella insurance nor homeowners insurance would cover the costs of a lawsuit or judgment against you.
  • Liability incurred in business or professional activities, as a commercial umbrella or business liability insurance policy would be needed to cover these situations.
  • If you sign a contact assuming liability.

How Much Does a Personal Umbrella Policy Cost, and What Limits are Available?

  • A personal umbrella policy applies when you reach the limit on the underlying liability coverage for your homeowners or auto policy.
  • Most insurers will want you to have about $250,000 each person / $500,000 each occurrence of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage8.
  • Personal umbrella policies are available in million dollar increments, typically ranging from $1 million to $5 million dollars9.

Sources:

1, 2, 7, 9. Investopedia. https://www.investopedia.com/articles/personal-finance/040115/how-umbrella-insurance-works.asp#:~:text=Umbrella%20insurance%20is%20a%20type,auto%2C%20or%20watercraft%20policy%20coverage.&text=Umbrella%20insurance%20coverage%20covers%20injury,t%20protect%20the%20policyholder’s%20property.

3, 5, 6. Nerdwallet. https://www.nerdwallet.com/blog/insurance/umbrella-insurance-complete-guide/

4. Kiplinger. https://www.kiplinger.com/article/insurance/t028-c001-s001-why-you-need-an-umbrella-policy.html

8. Insurance Information Institute. https://www.iii.org/article/should-i-purchase-umbrella-liability-policy-


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Merchants Insurance Group

Merchants Insurance Group sells its products through a network of more than 1,000 independent insurance agents in Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, and Vermont. We sell our products through independent insurance agents because we believe they provide value to policyholders through their broad range of products and their insurance expertise.